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Government Finances

LC Economics

Functions of Taxation Finance Government Activities. Achieve Economic Objectives. Redistribution of National Wealth. Automatic Stabiliser. Social objectives. Promote enterprise. 
Canon's of Taxation Equity, Economy, Certainty, Convenience
Equity of Taxation The tax system must be fair and take into account the ability-to-pay principle
Economy of Taxation The costs of collecting taxes should be as low as possible. The income collected should be greater than the cost of collection.
Certainty of Taxation The amount paid should be certain and clear. A taxpayer should know when they are paying tax and how much tax they are paying.
Convenience of Taxation The tax should be collected in a way and at a time which is convenient for the taxpayer. It
Taxation Revenues Monies/incomes received by the government in the form of direct & indirect taxes, and used in the running of the country.
Regressive tax a tax that does not take into account the ability to pay of a taxpayer. It takes a higher percentage from a low income earner.
Progressive tax a tax that does take into account the ability to pay of a tax payer.
Tax avoidance (Legal) involves organising your affairs to avoid paying tax or to reduce tax liability.
Tax evasion (Illegal) involves organising your affairs to illegally avoid paying tax or to reduce your tax liability.
The tax wedge the difference between the cost to an employer of its employee and the take home wage of the employee as a result of taxation
Tax Harmonisation policy of the EU that aims to make tax regimes similar in all EU member states
The imposition or impact of taxation the individual, firm or commodity on which a tax is levied.
The incidence of taxation the individual or firm, which actually end up paying the tax.
Revenue Buoyancy a situation where the revenue (income) collected by the government is greater than the amount the government predicted it would collect during the year.
Direct taxes taxes on incomes and wealth.
Income Taxed Charged at 20% & 41%
PAYE Pay as Your Earn. Income tax paid by employees
Self assessed Income taxed When a person is responsible for completing their own tax return to the Revenue. Generally people who run their own business.
DIRT Charged on interest earned. Currently 41%
Capital Gains Tax a tax on profits made from the sale of assets (second homes, shares).
Capital acquisitions tax a tax on gifts and inheritances received. The closer your relationship to the giver the less you pay.
Corporation tax a tax on company profits.
Indirect taxes taxes on goods and services
Value added Tax (VAT) is a tax on the sale of goods and services
Excise duty a tax put on certain products to discourage consumption
Customs Duty a tax on imports from outside the EU. It varies depending on the product being imported
Stamp duty Duties payable on a wide range of legal and commercial documents, including (but not limited to) conveyances of property
Advantages of Direct Taxes Equity. Economy. Certainty. Convenience. Adjustable.
Disadvantages of Direct Taxes Work may be discouraged. Investment is discouraged. When direct taxes rise, there may be an increase in the size of the black economy. Savings are discouraged 
Advantages Of Indirect Taxes Economy. Convenience. Work/investments are not discouraged by indirect taxes. Environmental/Social Benefits 
Disadvantages of Indirect Taxes Inequitable. Inflationary 
Ways to eliminate income inequalities Welfare benefits could be increased. Tax changes. Wealth tax. Target universal entitlements. Increase the minimum wage rate
Government Current Budget Outlines the government’s planned revenues and expenditures for the forthcoming year for day to day purposes
Current Budget Deficit Current government expenditure exceeds current government revenue
Government Capital Budget Outlines the government's planned expenditure on items not used up during the year but which increase the productive capacity of the country
Exchequer Borrowing Requirement (Exchequer Balance) The amount borrowed by central government to fund a current budget deficit and any borrowing for capital purposes
Public Sector Borrowing Requirement (General Government Balance) The exchequer borrowing requirement plus borrowing for semi-state/state sponsored bodies and local authorities.
Positive consequences of a Current Budget Surplus Reduced inflationary pressures. Managing our finances. Adhering to EU guidelines. Scope for taxation reforms. Uses of this increased govt. revenue.
Negative consequences of a Current Budget Surplus Rise in conflicting expectations.Public Sector Workers seek increases. Tax reductions sought. Government financial planning inept. Opportunity costs of a surplus. 
National Debt This is the total amount of outstanding borrowing by the government.
Reasons for the National Debt Improved Public services: o Increased spending on infrastructure: o Future Economic Growth: o Self-Liquidating debt:
Role of the National Treasury Management Agency Borrowing on behalf of the Irish Government / sale of government bonds. Managing the Irish National Debt on behalf of the government. Managing of the National Pension Reserve Fund. Managing Dormant Account Fund. Handles Personal injuries claims
Created by: dkellybusiness



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